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Selling HS2 by the pound

It is interesting to look back on a speech given by the Prime Minister prior to Sir David Higgins taking over at HS2, towards the end of 2013.

Mr Cameron was at pains to emphasise the limited impact of the money being spent on the project would have on the overall amount allocated to transport schemes. He remarked that from 2015-2020, £16bn would be spent on HS2 compared to £73bn on all rail and road schemes. But even expressing it in this way, casually rolling in road investment too, still meant one quarter of the transport budget would be spent on a single project.

And since Network Rail’s modernisation programme came to a juddering halt in June, any claim that HS2 will not impact financially elsewhere looks dubious.

This way of packaging HS2 had echoes of Philip Hammond when Transport Secretary speaking in 2011. He referred to HS2, in the context of budgetary allocation, picking up where Crossrail would leave off when the latter was completed. His pointed out that the annual expenditure on Crossrail was £2bn. HS2 would simply continue with the level of expenditure the public purse was already accustomed to spending. It all sounded remarkably painless.

Speaking two years later, Mr Cameron increased the annual figure to something over £3bn…a mere bagatelle.

It might appear that this is a strange why to express the financial commitment to the project. In another way it makes very good sense from the perspective of those supporting it.

Having been used to the enormous sums bandied about when HS2 is discussed, £3bn does not sound too frightening. But this approach skirts around what exactly taxpayers would be getting for their money each year as time passes.

The budget for HS2 is stuck in 2011. But expressing the cost of HS2 in 2011 prices ecourages complacency in the extreme. Factoring in inflation will push the HS2 bill way beyond £50bn.

While the costs benchmark is kept at 2011, the whole thing looks both manageable and reasonable. Likewise, expressing the scheme’s cost in annual sums makes HS2 seem like a less wretched deal for taxpayer.

So expect supporters, from the Prime Minister downwards, to keep to the soothing rhetoric and reach for the spoonful of sugar to mask the taste of an unpalatable reality.

For years now, we have seen this on-going manipulation of the numbers with many perhaps not seeing through it and many many others wilfully playing along with it. The other big one (lie) is the ‘£38.5bn investment in Network Rail’ when this is simply NR’s spending budget over the five years of CP5. The ‘British rail’ system’s running / investment costs are totally opaque so that no one knows what the TOCs’ income/expenditure might be though they are guaranteed to make a profit while NR faces an increase in net debt of £20bn in CP5 to £50bn. The debt increase reflects the interest and true investment being made (now reduced to S West electrification) but also the hidden subsidy to the TOCs. The £50bn NR debt is considered ‘the limit’ which is why they are cutting back on worthwhile projects but HS2’s £42bn is ‘not a problem’ with the money steel (and barb) ‘ring fenced’. There is no comparison in these numbers of course as NR’s debt covers 10,000 miles of line (plus other assets such as many major stations – and the unquantified subsidy over many years) against HS2’s 350 miles and a few park-and-ride type stations. One day, someone in NR will speak out instead of taking the cushy HS2 sinecure. Actually, it cannot be easy sticking to the banal HS2 line, can it ….?